Turkey Monetary Policy


Turkey: Central Bank key rates unchanged for 10th month in a row

December 22, 2015

At its 22 December monetary policy meeting, the Central Bank (CBRT) decided to maintain all its main policy rates unchanged for the 10th consecutive month. The CBRT left unaltered the one-week repo rate at 7.50%, the overnight borrowing rate at 7.25% and the marginal funding rate at 10.75%. The decision surprised market analysts, who expected the CBRT to increase the one-week and the overnight borrowing rates in an attempt to simplify the current monetary policy framework.

Almost mirroring the previous statement, the CBRT stated that amidst a backdrop of tight monetary policy and macro-prudential measures, loan growth remains at moderate levels. The Bank also acknowledged that net exports are contributing to overall growth mainly due to rising demand from the European Union.

Regarding price developments, the Central Bank stated that energy price dynamics are having a favorable impact on inflationary pressures; however, this favorable effect is delayed by exchange rate movements. The Bank added that considering this delay and high levels of uncertainty in global markets regarding inflation, the CBRT decided to maintain a tight liquidity policy for as long as deemed needed.

Looking forward, the Bank commented that, “future monetary policy decisions will be conditional on the inflation outlook.” Moreover, the Bank reaffirmed its tight monetary policy stance by stating that, “the tight monetary policy stance will be maintained.”

FocusEconomics Consensus Forecast panelists see the one-week repo rate ending 2016 at 9.36%. Meanwhile, FocusEconomics Consensus Forecast panelists see the marginal funding rate ending 2016 at 11.33%.

Author: Ricard Torné, Lead Economist

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Turkey Monetary Policy Chart

Turkey Monetary Policy December 2015

Note: 1-week repo rate, overnight borrowing rate and marginal funding rate in %.
Source: Central Bank of the Republic of Turkey (CBRT).

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